Burchard v. Phillips , 11 Paige Ch. 66 ( 1844 )

The Chancellor.

The equitable right of the respondent to the surplus money, is at least equal, if not superior, to that of the appellants. And he having obtained the same by due course of law, and his proceedings having been strictly regular, there is no reason why this court should interfere to deprive him of the fruits of his superior vigilance. The mortgage to Phillips, for the purchase money, although subsequent in time to the judgment of the appellants against the mortgagor, was entitled to preference in payment. And if the respondent, when he advanced $1000 of the trust moneys in his hands ’to be applied towards that mortgage, had taken an assignment of the mortgage pro tanto, instead of a new mortgage upon the premises, there could be no pretence, on the part of the appellants, that their judgment was entitled to a preference in payment over the moneys thus loaned by the respondent. The money, however, was advanced to pay a portion of the lien entitled to a preference, upon the security of the mortgaged premises alone, and upon the faith of Parrish’s representations that there were no other incum-brances upon the premises than the two mortgages to Burchard and to Phillips, and that the new mortgage for the loan would take the place in point of priority of the part of the mortgage upon which the money was applied. And the appellants now ask the court to give them the benefit of this mistake of the respondent, after he has avoided the effect thereof by obtaining the surplus moneys Under a regular proceeding, according to the course and practice of the court.

It is not necessary to express any opinion upon the question whether the respondent, under the circumstances, was not in equity entitled to be subrogated to the rights of the mortgagee upon whose mortgage this loan was applied; so as to give the respondent the preference over the general lien of the judgment, even if the appellants had filed their claim before the reference to the master in relation to the rights to the surplus moneys. For if the appellants had acquired a preference by a mere accident or mistake on the part of the respondent, and had lost such preference afterwards by a similar mistake or accident, on their' part, in neglecting to inquire as to their rights and to file their claim in season, a court of equity ought not to interfere to restore the preference which they had acquired as well as lost by mere mistake and accident.

I also think the vice chancellor was right in supposing that it was too late for the appellants to apply for summary relief, after the court had lost its control over the surplus moneys by a payment thereof to another claimant, under an order of the court regularly obtained. So long as the fund remains in court, I have no doubt it is competent for the court to let in an incum-brancer to assert his claim to the surplus moneys, where the equity of the case is with him, and his neglect to file his claim in due season is satisfactorily accounted for. In the analogous case of a bill to administer the estate of a deceased person, a creditor who has neglected to come in and prove his debt before the master within the time limited for that purpose, may be per-, mitted to come in, upon terms, so long as the fund remains under the control of the court. I am not aware of any case, however, in which the court has permitted a creditor to come in, under the decree, after the fund has all been paid out to other creditors or legatees, under an order regularly obtained. But where the money has been paid out under an order irregularly obtained, I presume the court has jurisdiction, in a summary proceeding, to compel a party who has obtained possession of its funds improperly, and without its authority, to restore the same.

Here the proceedings, on the part of the respondent, were not only perfectly regular, but they appear to have been conducted in good faith. It is true he had notice of the recovery of the complainant’s judgment as early as October, Í842. But from the information obtained from Parrish, and from the letter of Williams, who was agent of the appellants in obtaining the security for their debt, the respondent had reason to believe that the payment of that judgment had been fully provided for without resorting to the lien thereof upon the mortgaged premises.

The order appealed from must therefore be aiBrmed with posts.